On December 20, 2019, President Trump signed the National Defense Authorization Act (NDAA) for Fiscal Year 2020, including Section 7503(d), also known as the Protecting Europe’s Energy Security Act (PEESA) of 2019.
Related parties must ensure that vessels involved in Nord Stream 2 “immediately cease construction-related activity” in a “good-faith wind-down,” as indicated by the Office of Foreign Assets Control (OFAC). That includes “involved parties that have knowingly sold, leased, or provided vessels that are engaged in pipe laying at depths of 100 feet or more below sea level for the construction of Nord Stream 2.” Parties that do not comply will face sanctions as described in PEESA.
Nord Stream 2 is a tool Russia is using to support its continued aggression against Ukraine. Russia seeks to prevent it from integrating more closely with Europe and the United States. Nord Stream 2 would enable Russia to bypass Ukraine for gas transit to Europe, which would deprive Ukraine of substantial transit revenues and increase its vulnerability to Russian aggression. Nord Stream 2 would also help maintain Europe’s significant reliance on imports of Russian natural gas, which creates economic and political vulnerabilities for our European partners and allies. For these reasons, the United States Government and a plurality of European countries oppose Nord Stream 2.
The United States Government strongly supports diversification of energy supplies because options help diminish the role of geopolitics in energy markets, reduce consumer prices, and enhance a country’s energy security. For instance, it has been estimated that the availability of U.S. LNG saved European consumers $8 billion by enabling them to negotiate lower prices with existing suppliers.
The U.S. State Department will follow the letter of the law of the new NDAA legislation. It provides the Secretary up to 60 days to issue a report to Congress to identify violating entities. The Secretary will issue that report expeditiously. The United States will impose sanctions unless related parties immediately demonstrate good faith efforts to wind-down. Related parties need to finish wind-down within 30 days. Any company involved in Nord Stream 2 needs to look carefully at what that means for their operations.
The United States’ intention is to stop construction of Nord Stream 2. Congress acted, and the President signed the bill. The U.S. position opposing Nord Stream 2 has been consistent across multiple administrations, as part of a longstanding practice to promote energy security through diversification of energy supplies by country of origin, path of delivery, and fuel types, including renewables. Anyone engaged in the energy trading business ought to do it under fair terms, which are transparent, and operate according to market principles.